Posts by Zia Daniell Wigder from April 25, 2008

Zia Daniell Wigder | April 25, 2008, 11:51 AM
Predicting US online retailers’ global expansion

One question I’ve asked US online retailers expanding internationally is how they prioritize their global site launches. Some of the factors cited most frequently include:

- Size of e-commerce market
- Regulatory environment
- Existing operations in-country
- Use of English language
- Internet penetration
- Broadband penetration
- Potential to repurpose foreign-language content

To determine which factors are having the greatest impact on decisions, I’ve spent some time mapping online retailers’ global transactional sites to a variety of different metrics. Overall, there’s no single factor driving their expansion route, but some clearly play a greater role than others.

Common language. Canada and the UK figure highly among US online retailers’ global sites; in the case of Canada, it's far beyond its relative market size. While Canada certainly comes with non-English language regulations and challenges, retailers often cite the use of English as a key factor in their Canadian expansion. And in Europe, US-based online retailers almost always target the UK as their first market.

E-commerce market size. For US online retailers expanding into Europe, market size tends to trump the leveraging of local-language content or overall Internet penetration levels. US online retailers are more likely to expand into the relatively larger markets of UK, Germany, France, Italy and Spain – all of which mandate different languages - than to expand into one or two in this group and then leverage their local-language content across borders into smaller countries (eg Austria, Switzerland). Similarly, Internet and broadband penetration, while cited as an important factor to many companies, hasn’t driven most US online retailers to the Internet- and broadband-intensive areas of the smaller northern European countries.

Broader trade relations. Neither a common language nor e-commerce market size completely captures US companies’ focus on their NAFTA partners, however. Online investment in Canada and Mexico incorporates geographic proximity, trade agreements and companies’ existing relationships within these countries. Indeed, one metric that does capture some of the dynamics of US retailers’ online expansion route (and includes the regulatory issues and existing in-country operations mentioned above) is the top export markets for US companies overall. As demonstrated in the graphic below, every one of the top 10 export countries is served by at least three of Internet Retailer’s top 10 US-based online retailers. As the US’ largest trading partner, Canada is served by nine. The list also reflects US online retailers’ interest in Mexico, although the country is arguably underserved given that transactional sites are operated by less than half of the top 10 online retailers.

More on this topic – and how companies should be assessing different international markets – to come in our research.